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Managerial Power and Compensation

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Author Info
Bruno S. Frey
Marcel Kucher

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Abstract

According to the widely used Managerial Power Model, a higher hierarchical position with associated higher power leads to higher compensation. In contrast, the Compensating Wage Differentials Model argues that there is a non-positive relationship between positional power and total compensation. Both power and income yield utility and in equilibrium managers are prepared to trade-off the two elements. The two opposing propositions are tested using a large survey data set from Switzerland. The results suggest that power positions do not yield higher compensation. Rather, there is a non-positive relationship between power position and compensation, if one takes into account all relevant factors influencing total compensation.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp028.

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Handle: RePEc:zur:iewwpx:028

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Related research
Keywords: Power; Managerial Compensation; Compensating Wage Differentials;

Find related papers by JEL classification:
A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rosen, Sherwin, 1987. "The theory of equalizing differences," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 12, pages 641-692 Elsevier. [Downloadable!] (restricted)
  2. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February. [Downloadable!] (restricted)
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This page was last updated on 2009-12-17.

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